Rick Holmes: Troubled financial waters

Saturday

Jan 26, 2008 at 12:01 AMJan 26, 2008 at 8:28 PM

I ran out of heating oil this week, a confession I'm not especially proud of. It was a combination of things: I'm used to paying $300 to fill the tank, and the latest bill was more than $600. The oil company seems to want to be paid yesterday for every drop it delivers. I wanted to wait until payday so the check wouldn't bounce. The oil company delayed the delivery, bitter cold hit over the weekend and on Monday morning I had no hot water.

Rick Holmes

I ran out of heating oil this week, a confession I'm not especially proud of.

It was a combination of things: I'm used to paying $300 to fill the tank, and the latest bill was more than $600. The oil company seems to want to be paid yesterday for every drop it delivers. I wanted to wait until payday so the check wouldn't bounce. The oil company delayed the delivery, bitter cold hit over the weekend and on Monday morning I had no hot water.

Fortunately, they had received my check Saturday and a delivery was already scheduled. By the time the truck arrived, the house felt like an icebox, but it's OK now. All the bills are paid and the house is warm.

What's still chilling, though, is how close my typical family lives to a financial precipice - and how many of my friends and neighbors can feel the ground crumbling beneath their feet.

This isn't about me, it's about us. We're living through a very scary moment.

We watch the stock market tumble and see our retirement savings slipping away.

We watch home prices fall and take our net worth with them. Not only have we been counting on all that appreciation for future needs, we've been borrowing against it to make ends meet.

Our paychecks grow by pennies while expenses skyrocket. When I finally got my oil tank filled, the bill came to $707. Filling up our aging minivan costs close to $60.

Many of us saw our health insurance premiums go up - again - with the first of the year. Others were required by the new Massachusetts health reform law to buy insurance of face a penalty. It's cheaper, they say, than it would have been before the new law, but it's still money out of pocket some families can't afford.

It's January, and that means the credit card bills from Christmas shopping are coming in. And the cars are starting to break down, and income tax season is coming.

Speaking of taxes, while our assets are losing value, our property taxes keep going up - and they are going up again.

Finance committees in every city and town are crunching the numbers for the next fiscal year, and it doesn't look good. New construction isn't padding the budget, excise tax and lottery revenue is down. With the state facing a $1.8 billion deficit - that will only grow if we slip into a recession - don't expect much help from the boys on Beacon Hill.

Meanwhile, your town and your schools are faced with the same rising costs as your family, especially for health care and energy. So there's a property tax override in your future, and people aren't going to be nearly as supportive as they were a few years ago. The campaigns will be ugly and the chances of defeat are higher than ever.

Pretty bleak stuff - and that's just for those of us who have jobs and can pay the rent or the mortgage.

As my house regained its warmth, I thought of people who have things much worse. I have a friend who lost his job months ago, just as his wife got terribly sick. Of all the things wrong health care today, nothing is more cruel than the system by which you lose your job and your health coverage on the same day. My friend is saddled with thousands of dollars in medical bills.

Another friend tells me of a house on his street that was teeming with life a few months ago. Now it's empty, taken by the bank. The family has moved in with relatives.

It's happening on every street. There were 7,653 foreclosures in Massachusetts last year, the Warren Group reported this week, a number that is up 148 percent from the previous year, up 600 percent from 2005.

For some, the next stop is a homeless shelter. NPR's Marketplace reported this week that homeless families, not disturbed, disabled and down-on-their-luck individuals, now account for 40 percent of the homeless population. In Massachusetts, more families are living in homeless shelters than at any time since 1983.

Some have homes, but are short on food. The U.S. Department of Agriculture reported in November that 35.5 million Americans, including 12.6 million children, are living at the edge of hunger. That number is up 400,000 from the previous year - and a recession will only drive it higher.

Americans are adrift in troubled economic waters, a fact our insulated leaders seem to have suddenly discovered when they started hearing whines from their Wall Street contributors.

Things were going so well for the financial services industry. They sold us all on subprime mortgages and multiple home refinancings, which helped drive the cost of housing to atmospheric heights. We homeowners didn't complain, instead cashing in our home equity to pay for things our paychecks couldn't cover.

Then the Wall Street gang invented all kinds of cut-rate loans and new investment vehicles almost nobody understood. They sold and resold mortgages like they were pork futures, in the process separating the bank issuing the mortgage from the consequences of the borrowers defaulting.

Meanwhile, the people who are supposed to regulate this industry slept - or willfully ignored the warning signs. That was fine with Wall Street: Just last month, financial services companies gave their executives a record $39 billion worth of year-end bonuses.

Now those executives are begging oil sheiks to bail them out. The bondholders, stuck with mortgages borrowers can't afford to pay off, are lobbying for relief from Washington.

And what do the rest of us get? Rebate checks worth $300 - five tanks of gas - or $600, which might fill your heating oil tank. How far will $300 - up to $1,200 for a qualifying family - go against this tide of bad news? A Marlborough woman got it about right, telling a Daily News reporter, "It's putting a Band-Aid on a ruptured aorta."

The middle class squeeze has been long in coming. Harvard Law School professor says that after adjusting for inflation, the typical American family spends 75 percent more on housing and 100 percent more on health care than a generation ago. The only thing that has kept us afloat is having two spouses working.

But when one of those wage-earners gets laid off, or gets sick, or files for divorce, the family ship starts to sink. There are rough waters ahead, and a one-time government rebate check won't buy a life preserver that can keep us afloat.

Rick Holmes, opinion editor of the MetroWest Daily News, edits the Holmes & Co. blog (http://blogs.townonline.com/holmesandco). He can be reached at rholmes@cnc.com.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.